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Revenue Persistence and Public Service Delivery

Traviss Cassidy

MPRA Paper from University Library of Munich, Germany

Abstract: I exploit unusual policy variation in Indonesia to examine how local responses to intergovernmental grants depend on their persistence. A national reform generated permanent increases in the general grant that were larger for less densely populated districts, while hydrocarbon-rich districts experienced transitory shocks to shared resource revenue. Public service delivery strongly responded to the permanent shock, but not to the transitory shocks, consistent with districts providing lumpy public services as a function of lifetime fiscal resources. The timing and composition of expenditure responses are consistent with this mechanism. I discuss implications for decentralization policy and research on taxation and accountability.

Keywords: Intergovernmental grants; public goods; flypaper effect; resource curse (search for similar items in EconPapers)
JEL-codes: H72 H75 H77 O13 Q38 (search for similar items in EconPapers)
Date: 2017-09-01, Revised 2022-09-06
References: View references in EconPapers View complete reference list from CitEc

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